PPP loan recipients will not be taxed on PPP loans forgiven: The new legislation ensures tax-free treatment of forgiven PPP loans. The new bill specifies that business expenses paid with forgiven PPP loan funds are tax-deductible, superseding previous IRS guidance that business expenses paid with forgiven PPP funds would be treated as non-deductible expenses. This is great news for small business owners who have received PPP loans.
PPP2 Loans: A second round of PPP loans (PPP2 loans as they have been dubbed) have been made available with the new bill. Additional PPP2 loans are available to the following businesses:
- First-time qualified borrowers
- Certain businesses previously receiving PPP loans provided they:
- Have 300 or fewer employees
- Have used or will use the full amount of their first PPP loan
- Can show a 25% gross revenue decline in any quarter in 2020 compared with the same quarter in 2019
The maximum amount of PPP2 loans is $2 million, which is less than the original PPP maximum of $10 million. The bill also expands the types of organizations eligible to receive PPP funds to include certain types of nonprofit organizations.
Simplified forgiveness application and approval process for PPP loans under $150,000: The Small Business Administration (SBA) will be required to create a one-page form for loan forgiveness applications for PPP loans of $150,000 or less on which the borrower must certify the following items to be granted loan forgiveness:
- Number of employees the borrower was able to retain because of the loan
- Estimated amount of the loan spent on payroll costs
- Total loan amount
Borrowers are required to maintain relevant documentation related to information provided to obtain the loan in their records. The SBA may review the loans to check for fraud.
